The paper evaluates Section 42 of RA 7916, otherwise known as the Special Economic Zone Act of 1995, providing for additional deduction equivalent to one-half percent of the value of training expenses incurred by enterprises in the economic zones. It notes that the additional deduction of 50% of the total cost of the value of training expenses incurred by firms in the economic zones contradicts the concept of gross income taxation and dilutes the government share from the tax. It recommends the prescription of a maximum amount of allowable deduction; securing of PEZA pre-approval on the training programs; setting up of an effective monitoring system; and conducting a comprehensive review of the incentive package.
